IR row counterproductive

The head of Australia’s workplace tribunal has called for an independent inquiry into productivity, arguing that there is little evidence of a direct link between workplace legal systems and productivity growth.

Fair Work Australia president
Geoffrey Giudice
said Australia “sorely needed" sound policy on productivity, but that “much of the debate . . . seems to be based on political positioning rather than on hard analysis".

Reserve Bank governor Glenn
Stevens
has stressed the need to improve Australia’s recent weak productivity performance, and the Gillard government has stressed skills and infrastructure investment rather than changes to workplace law.

Justice Giudice said political debate on productivity reflected the “polarity between the major interests in workplace relations", rather than economic data recorded during the four major overhauls of the laws conducted since 1993.

“It would be difficult on this evidence to establish any direct link between the type of industrial regulation and productivity growth," he said.

His comments, which were made last Friday and released generally ­yesterday, contradict arguments by employer groups that Labor’s Fair Work Act is partly to blame for Australia’s poor recent productivity ­performance.

But Australian Chamber of Commerce and Industry chief executive
Peter Anderson
said the speech added weight to the calls from business for a close examination of Labor’s new workplace laws.

“The president of the tribunal is not in the best position to comment on policy matters because he has to administer the law as he finds it," Mr Anderson said.

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“The review should not be based around narrow economic definitions. It needs to deal with productivity in the broad sense of the impact on labour regulation and business ­efficiency.

“If a business no longer trades on a Sunday or at certain hours because of penalty rates, then it is less productive, but it’s not included in the productivity data."

Workplace Relations Minister
Chris Evans
has sidestepped the call for an inquiry into productivity, noting that a review of the Fair Work Act will be conducted by January 2012.

Senator Evans said yesterday that he welcomed Justice Giudice’s “important contribution, which highlighted the difficulty in establishing any direct link between productivity growth and industrial relations ­policies".

“The government remains committed to boosting the drivers of productivity," he said. “It is this goal which has seen us make record investments in education, critical skills training and job-creating infrastructure projects like the NBN [national broadband network]."

Justice Giudice told the Australian Labour and Employment Relations Association that he was not suggesting the nature of the industrial relations system was irrelevant to productivity performance.

“But the point which should not be lost sight of is that there are many things going on in the economy which influence productivity performance overall," he said.

“Changes in legislation are capable of affecting particular parts of the economy quite significantly, but measuring these effects requires great care and even then it may not be possible to quantify them properly."

He related Australia’s productivity performance to the chronology of major changes to workplace laws that started with the Keating Labor government’s shift towards enterprise bargaining in 1993.

This was followed by the Coalition’s Workplace Relations Act in 1996 and its Work Choices laws, which came into force in 2006 and were overhauled by Labor’s Fair Work system, introduced in 2009.

Justice Giudice said that most concern centred on multifactor productivity having “languished in negative territory" since 2005, while labour productivity had been “slightly more encouraging". “During the decade between 1996 and 2006, when the legislation was virtually unchanged, productivity grew for the first five or six years and then started to decline quite rapidly," he said.

“The advent of Work Choices does not seem to have had any direct effect and it is to be assumed that other influences have been more important.

“While the evidence seems to indicate that productivity growth has been negligible for the last six or seven years and has been negative for some years now, a number of explanations or rationalisations have been advanced.

“Some of them relate to the huge capital sums invested in [resource] projects, which take time to mature and return significant profits. There are other explanations which are concerned with measurement issues.

“If an inquiry could establish that what seems to be a very poor productivity performance is just a statistical creation, the inquiry would have served a valuable purpose. But I doubt that would be the outcome."

Justice Giudice said the number of working days lost to industrial disputes had remained low since 2004, despite changes to the law in 2006 and again in 2009. This shift was possibly related to the start of enterprise bargaining in the early 1990s, but a similar trend of fewer strikes had occurred at about the same time in most developed economies.

But smaller-scale strikes could still have “severe impacts" on the parties directly involved and the data did not include other forms of economic pressure applied by employees.

Justice Giudice said he had recently attended a conference in the UK on employee engagement that had covered dispute resolution, employee voice and the role of first-line management. “The proportion of a given job which involves employee discretion varies, of course, and the aim of increasing employee engagement is to tap unused discretionary effort.

“If the discretionary effort is increased only incrementally, the effect on productivity can be significant. It is not a very complex idea, but behind it lies a variety of considerations: design of organisations, dispute resolution systems, the role, authority and training of first-line managers, provision for employee contribution, and so on. The effect of industrial regulation should also be considered in this context."